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Taxing the Japanese

Updated Aug. 8, 1996 12:01 a.m. ET

When Japan's economy grew at an annualized rate of 12.7% in the first quarter of this year, many admirers of Japan's system of bureaucratic economic management thought it had been vindicated. The combination of massive public spending and generous money creation was bringing Japan, Inc. back to life with a roar, they thought, even in advance of promised reforms that would open up the country to greater competition and independent decision making.

But that judgment was a bit hasty. The rapid first quarter growth was an...